In a recent judgement, the High Court (Civil Chambers 1st Section) dated 23rd November 2016 has declared an agreement reach by the parties to a contract, which establishes a term of payment of invoices that exceeds sixty (60) calendar days, to be null and void.
The facts
In this case, a subcontractor claimed the payment of unpaid invoices for work carried out, plus interest, from the contractor.
The basic question addressed was the interpretation of the regulations regarding the scope of the limitation in the determination of the term established by Law 3/2003, of 29th December on combating late payment in commercial operations (hereinafter the “Law Combating Late Payments”) following the modifications resulting from Law15/2010 of 5th July, modifying the Law on Combating Late Payment and Law 11/2013 of 26th July on measures of support, stimulation of growth and the creation of employment (hereinafter, “Entrepreneur’s Act”).
Legislative background
Article 4 of the Act on Combating Late Payment left the determination of the term of payment to the parties, and in the absence of agreement thereupon, a term of 30 days was stipulated.
The possibility of an «agreement between the parties» was eliminated pursuant to Law 15/2010 of 5th July, in the interest of avoiding non-payment, delays, extensions for settling due invoices and abusive practices on the part of large companies concerning smaller suppliers.
Following the modification introduced in the Entrepreneur’s Act, the aforementioned article 4 of the Act on Combating Late Payment establishes (in short) the following:
General rule: the term for payment to be complied with by the debtor, when no date or term is stipulated in the contract, shall be thirty calendar days following the date of the receipt of the goods or the rendering of the services.
However, the indicated payment terms may be extended by means of agreement by the parties and under no circumstances may the term exceed 60 calendar days.
This temporary limitation is of an imperative nature, which means that any agreement exceeding said temporary limit of 60 natural days becomes null and void as it contravenes what is established by the imperative regulation (article 6,3 of the Civil Code).
Exception: if an acceptance or verification procedure has been provided for legally or in the contract via which the conformity of the goods or the services with the contract must be ascertained, the duration may not exceed thirty calendar days, from the date of receiving the goods or the rendering of services. In this case, the payment term shall be thirty days from the date upon which the acceptance or the verification of the goods or services takes place, even when the invoice or request for payment may have been received before the acceptance or verification.
In such cases, the legal limit of the term may be extended for up to 90 calendar days as from the date of delivery of the goods or the rendering of the services.
Practical relevance
The due date of the invoices, when unpaid, becomes relevant when adding the interest agreed in the contract or stipulated by the Law on Combating Late Payment to the claim of the principal amount, without the need for notification of the amount becoming due or any other indication from the creditor. Said interest shall become due in accordance with the temporary limitations established in the regulations, being null any agreement between the parties for the payment of invoices within a term exceeding sixty (60) calendar days.
Conclusion
Finally, the High Court points out that the mere fact that clauses or contractual practices which contravene the indicated terms have not been challenged does not in any way constitute any act which prohibits the claim in the course of the execution of the contract, in such a way that nothing may stop the creditor from exercising its right that judicially the conditions thereof, both agreed and implied, may be revised.
Carla Villavicencio
Vilá Abogados
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9th of December 2016
